Re Seadrill Ltd and Ors

• Jurisdiction: Bermuda
• Judgment Date: 03 April 2018
• Date: 03 April 2018
• Docket Number: Commercial Jurisdiction 2017 Nso 302, 303, 304
• Court: Supreme Court (Bermuda)

[2018] Bda LR 39

In The Supreme Court of Bermuda

Commercial Jurisdiction 2017 Nso 302, 303, 304

In the Matter of Seadrill Limited (In Provisional Liquidation)

And In the Matter of North Atlantic Drilling Ltd (In Provisional Liquidation)

And In The Matter of Sevan Drilling Limited (In Provisional Liquidation)

Ms K George for the Joint Provisional Liquidators

Ms R May and Mr R Williams for the Companies

Mr J Wasty for the Coordinating Committee on behalf of the lenders of 13 senior secured facilities of the Seadrill Group (Creditors)

Ms S Smith-Bean and Ms K Durham for certain Minority Shareholders of Sevan Drilling Ltd

The following cases were referred to in the judgment:

Re Energy XXI Ltd [2016] Bda LR 90

Cambridge Gas Transportation Corp v Official Committee of Unsecured Creditors of Navigator Holdings plc [2006] UKPC 26

Rubin v Eurofinance [2013] 1 AC 36

Singularis Holdings Limited v PricewaterhouseCoopers [2015] AC 1675

Parallel Restructuring Proceedings For Bermuda Companies — bermuda Provisional Liquidation And Us Chapter 11 Proceedings — application By Provisional Liquidator For Prospective Recognition Order — opposition To Recognition Order By Minority Shareholders Who Had Submitted To Us Bankruptcy Court Jurisdiction — standing

JUDGMENT of Kawaley CJ

Background

1. On 13 September 2017 the Companies presented winding-up petitions to this Court. The previous day, they had entered into a Restructuring Support Agreement (“RSA”) and (together with other affiliates) filed voluntary petitions under Chapter 11 of the United States Bankruptcy Code (the “Chapter 11 Proceedings”) with the United States Bankruptcy Court for the Southern District of Texas, Victoria Division (the “US Court”). The Petitions averred that the Chapter 11 Proceedings had been commenced to serve as a platform for restructuring the Group (which was engaged in offshore drilling), as a response to liquidity challenges resulting from the downturn in the oil and gas industry.

2. On 13 September 2017, Hellman J heard and granted the Companies' Ex Parte Summonses issued on the same date seeking to appoint the JPLS (Simon Edel and Alan Bloom of Ernst & Young LLP, London, and Roy Bailey of Ernst & Young Ltd, Bermuda Bahamas, BVI and Cayman Islands). Paragraph 1 of that Order empowered the JPLs, inter alia:

• “(a) to review the financial position of the Company;

• (b) to oversee the continuation of the business of the Company under the control, of the Company's Board of Directors (“the Board') and under the supervision of this Court and the US Court;

• (c) to oversee, in conjunction with the Board, the Chapter 11 Case and such other proceedings as deemed appropriate by the Company after consultation with the JPLs…”

3. On 27 October 2017, the duly advertised Petitions were adjourned until 27 April 2018 with the consent of all those who appeared. On 26 January 2018, I gave directions sought by the JPLs for the issuing and service of an inter partes Summons seeking recognition of a Chapter 11 Plan and permanently staying all claims of creditors and shareholders against the Companies. The Directions Order also provided that:

• • the hearing of the Summons should be fixed having regard to the timetable in the Chapter 11 proceedings; and

• • that any creditor or shareholder wishing to object to the Summons should file an affidavit setting out the grounds of their objection not less than four days before the hearing.

4. The Summons was issued on 20 February 2018 returnable for 23 March 2018. The First Affidavit of Neil Joynson dated 21 March 2018 deposed that the inter partes Summons was served with the Solicitation Package sent to voting and non-voting groups in the Chapter 11 Proceedings. Service was confirmed in those Proceedings by an Affidavit of Service filed on 13 March 2018. At the hearing on 23 March 2018, Mrs Smith-Bean applied for and was granted an adjournment (until 29 March 2018) as she had only recently been instructed by certain Minority Shareholders of Sevan to oppose the Summons.

5. On 29 March 2018 I granted the Recognition Order and Permanent Stay sought by the JPLs and the Companies, including Sevan. These are the reasons for that decision.

The inter partes Summons

6. The JPLs primarily sought an Order that:

“1. Recognition of the Plan of Reorganization of the Companies (the ‘Plan’) filed by the Companies under chapter 11 of title 11 of the United States Code, 11 U.S.C. §§ 101–1532, in the United States Bankruptcy Court for the Southern District of Texas, Victoria Division (Case No. 17–60079) be granted, effective upon the confirmation of the Plan by the said US Bankruptcy Court, and the occurrence of the effective date of the Plan pursuant to its terms.

2. To give effect to the Plan in Bermuda:

2.1 All claims by creditors and shareholders that have been brought in this jurisdiction against the Company are hereby permanently stayed;

2.2 Leave shall not be granted under section 167(4) of the Companies Act 1981 for the commencement of proceedings against the Company; and

2.3 No debts may be proved by any creditors whose claims are affected by the Plan on its terms, and no claims may be brought by shareholders/contributories, within these proceedings….”

Legal basis for the JPLs' application

7. Ms George submitted in the JPLs’ ‘Outline Submissions’ that the “restructuring of Bermudian companies by way of parallel proceedings under Chapter 11 of the US Bankruptcy Code in the US, and light touch provisional liquidation proceedings in Bermuda, has been standard practice in the Bermuda Court since the case of ICO Global Communications Limited[1999] Bda LR 69.” The Order sought was similar to Orders made by this Court in Re Energy XXI Ltd[2016] Bda LR 90; Re C & J Energy Services Limited[2017] Bda LR 22.

Legal findings...